Life is calling. Don't say you are struck in traffic.

I am a regular user of Bangalore Metro now. It feels like a wonder when you travel in it at a nice speed and you watch the traffic on the roads below it is struggling to move an inch. Ask any Metro passenger, they would appreciate its reliability and convenience. Especially the women passengers, Metro has made life little easier for them. Why the traffic in Bangalore has worsened despite Metro running at full capacity carrying thousands of passengers every hour? I see following reasons for it.


Metro construction: The extension line construction of Metro (at Whitefield, Mysore road etc.) has really taken a toll. New bottlenecks are created and the average speed has come down drastically. A travel between KR Puram and Whitefield, though it is just 8 km’s, takes past one hour to two hours as Metro construction has occupied half of the road width. Everyone agrees the pace of construction is relatively fast but yet it will take good time before the civil works are complete and the lanes are freed up.


Increasing population: More people are moving into the town. Bangalore’s majority population has always been migrants. Not just from other parts of Karnataka and neighboring states but people originating from all parts of India are making Bangalore their new home. Probably Bangalore ranks highest among all towns of India in the number of new jobs being created (while rest of India seems to be under performing in job creation). Those new jobs mean new workforce moving in with their families. It also creates the increased need for supporting services like Schools, Hospitals, and Banks etc. George Soros had called this a self-reinforcing phenomenon, growth creating new growth opportunities. It is good to see Bangalore representing whole of India. But the bad part is all these new people are welcomed by the same old roads of it.


Picked up construction: A secondary impact of the new migrating population is increased demand for housing, office space, and commercial real estate. So the construction activity has picked up and much of construction materials have to come outside of Bangalore into it. All those trucks and the material moving vehicles of all sizes rush in and out Bangalore for brisk business.


Elections: Elections are nearby. National leaders of political parties are frequently visiting Bangalore and the local leaders have become actively engaged too. They roam around a lot along with their party workers. And there are political rally of many kinds being conducted bringing in lots of floating population. They all hit the clogged roads of Bangalore.


Call it a booming economy or a under developed infrastructure, Bangalore’s traffic finds new reasons to worsen with time. The pace of economic growth is not matched with the infrastructure addition. Though Metro is helping, it seems inadequate. Bangalore's seamless growth has its disadvantages. It is not just commute time or air quality, a drought year can bring its citizens a serious trouble over water.


To make it sustainable, industries based in Bangalore need to create jobs in other towns and voluntarily move their offices out of Bangalore. That would happen anyway but to make it early it needs encouragement from Govt. in the form of providing the infra needed for such a move. It seems like Chicken first or Egg first problem for now. Who would make the first move? I think it is the industry and the tipping point for that would be when the costs (real estate, transportation costs and wages) begin to hurt their profitability. May be five years from now, we would be in the middle of that problem. Until then, we need to learn to cope with the traffic or find alternatives to cut our commute time. Yes, find a house near to work location (or find a job near to your house) or go in shifts avoiding the peak hour, do whatever works for you (I have changed my job).


Save yourself from spending all evenings on road. Life is calling, where are you? Don't say you are struck in traffic.

Rupee is stronger as Dollar is weaker

This blog post title is funny but it is what it is. When we look at the exchange rate of a currency we assume that the reference currency has remained the same. For example, Rupee was exchanged at 66 for a dollar few of weeks ago. Now you need only 63 rupees and some change to get the dollar. At first glance, one might interpret that Rupee is getting stronger and say kudos to Indian economy. But wait, think slow and you will realize that it is Dollar which is weakening against all other currencies. What made it so?

US Fed is raising interest rates, it was supposed to make the Dollar stronger but it did not. Thanks to President Trump. His policies does not promote international trade like his predecessors did. In that situation, the reason for other countries to hold US Dollar in their reserves diminishes. Whether it is political clash or trade disputes, China is not piling up US bonds as before and in fact it may have reduced its dollar reserves. That has increased the supply of dollars in the system and there are no big takers for it. So USD lost to the tune of 10% against Euro and other currencies.

Rupee is benefited too because of this development. Though our economic growth has reduced slightly, trade and fiscal deficits have not changed significantly. So Rupee rallied against USD and scored some points. RBI holds $400B as forex reserves and it is likely to slow down or stop buying the dollars. That will help the gains in Rupee sustain. In case RBI decides to sell some of its reserves (like China did), expect Rupee to trade below 60 a dollar. Good times are coming. Are not they?

Your vote is worth at least Rs 5 lakhs

How much each vote is worthy? In some constituencies voters do get paid a couple of hundreds and in some it could be a few thousands. Can we do a valuation to arrive at what could be the fair price for each vote?

For this, first I looked at GDP per capita figures. It is $1709 per year. Converting this at an exchange rate of 64 rupee a dollar gives Rs. 1,09,376. Yes, every person in our country contributes a lakh rupee (on average) to the economy each year. Since election do come at every five years, cumulatively each person would have contributed around Rs.5.5 lakhs in that period. If we take GDP per capita as a proxy for valuation of vote, each vote is worth Rs. 5.5 lakhs of impact to economy. Since those aged under 21 do not vote but are counted for GDP per capita, this valuation figure may marginally go up.

So now think before you vote. If a politician is giving a couple of thousands to vote for him, it is dirt cheap, really. Think of the impact your vote is making on this country’s economy. If we elect law makers who manipulate systems for their own benefit, they are robbing away the benefits a flourishing economy gives to its citizens. Our central govt. has a budget to the tune of USD 200B a year. They collect so much in taxes (and little deficit is borrowed) and decide where that money should be spent on. Your vote has a share in that since it is public money.

My objective is to make each voter think like he or she is giving Rs. 5 lakhs out of their pocket to the person they are casting their vote. They need to think "Will that person make proper use of those funds?".  "Will he give higher benefits in return?" Yes, it is a social investment each voter is making. The better fund manager they chose, the better are the returns.

Can we have a financial metric for politicians? India is a democracy, we can and should have such a metric. Well, in reality we are not that mature. But if the voter become aware that their vote is actually worth lot more than they think of, it would lead to better selection. And those who do not vote should get a feel that their 5 lakh rupees is down the drain. That would lead higher participation and a better outcome from elections.

Manipulations in stock markets

Manipulation is nothing new in the stock markets but new tactics have evolved with technology enabling the use of algorithms. First of all, let us try to understand how manipulation works and  brings profits within a short term for those who set-up the game. Remember it is traders who are hurt the most and the long term investors the least in these plays.

• Every trader has an expectation with the direction of stock he is trading. It could be bullish, bearish or sideways.
• They have a trading plan too. Enter at some price, book profit at some price point or stop loss at a point when their trade goes wrong.
• And there are a given number of traders in a particular stock at the given time.

The above information is enough for an algorithm to set-up a game. Let us say, in one particular stock, there are more bullish players. Let us assume 80% of the bets are on the one side and if it is a small counter, it is possible to manipulate the stock (for example, by buying puts, selling calls and heavy selling in cash market simultaneously). As spot prices drop, all of those traders playing bulls will be forced to get out of the market as their stop losses get hit. The manipulator uses few tens of crores on just one stock to take it below technical support level of the traders (as identified by the algorithms). He will make small loss in spot market but gains huge in derivatives. As he kills all weak traders, he gets out of that counter. Sanity check comes back slowly and the stock price comes back to normal levels. This is just one simple example but the algorithms can be set for multiple strategies to make money for those who employ them.

How do you know which stock is manipulated?

• Look for very high OI on the option chain and Futures. As it reaches 100% of the limit, stock goes into F&O ban.
• In the intra-day, you will see high price variations with low volume. And the reversal happens pretty quickly. This process repeats multiple times as a bait to attract traders and then put the short term traders into a trap.
• Look for divergence from non-manipulative counters. Indices (like Nifty) and bigger stocks with a wide investor base (like Larsen, HDFC Bank) are not easy to manipulate as the manipulator need huge sums of money to manipulate and even if attempted there would be counter forces coming into play soon to restore the normalcy. In case of manipulated stocks, you will see an overreaction or divergence from broader market direction.

How do I survive now as a trader?

For human traders, it is not an easy thing to compete with algorithms. Psychological pressures will be very high to handle and the technical indicators seems to go wrong (as they are manipulated). So it best to avoid the counters once you identify the manipulations in them and stick to your trades in indices or with large cap stocks.

But if you are an experienced trader and have the ability to look at markets dispassionately, you would be able to understand what these algorithms are at since they are also devised by human beings. The key here is not to be emotional, wait patiently, do not get into devised traps and when the market seems to be not expecting a move, then you have a chance to go for a swing trade as those algorithms go out of action and you will have a chance to profit from it.

This opportunity does not come every day so one needs to wait until overselling or buying reaches an irrational stage and after that nothing seems to be happening for some time and it leads to volatility drop as one sided trades go awry. When the interest seems to be dead and a common person wonders 'what is happening with his stock?', the reversal happens. To time it and to know a price range to enter and exit, you need to understand fundamentals along with technical of that stock well along with market conditions and the changing investor profiles. It is really a hard game. As algorithms take the stock beyond fair levels on either direction, there lies an opportunity for a human trader to get into the game.

In summary, just being a technical trader, you cannot beat the algorithms consistently in the mid-cap or small cap stocks. It is better to focus on large cap stocks and indices. If you still want to trade in manipulated counters, keep your exposure limited. Do not just use support and resistances to enter a trade which worked earlier but no more, instead get a balanced view. You will begin to understand the master game being played.

Note: I do not mean all of algorithm trading is manipulative but I am of the opinion that it makes the manipulation easier.

Earning freedom (from banks and employers)

(This post is for those who pay higher portion of their income to housing loans)

A post on LinkedIn said buying a house on a long term loan takes off the creativity from us and it does not let us do whatever we want to accomplish in our lives. True, as we have to honor the EMI we owe to bank, we step away from taking risks and stick to routine jobs and in the process, creativity and innovation get lost. So what is our aim in life? If it is just owning a house, then we should buy a house as early as possible and stop worrying about rest of the aims or purposes in life. But the mid-life crisis does not let us live happily in the houses we built from the borrowed money. The question comes back again and again of what we wanted from our lives and owning a house at the expense of our careers tied to it for decades does not look that meaningful. At least to me.

Then I came across this article. https://www.thriveglobal.com/stories/15578-you-can-t-thrive-and-change-the-world-on-a-hamster-wheel. It was a straight hit on the head of the nail with such an impact that it got into my head effortlessly. Probably I was convinced with the idea already and this article came as a reinforcement. We end up buying many unwanted things, buying a house bigger than we need and so on. The worst part is we do it with debt. That is how we walk into slavery. As we owe more money to banks, we start liking our jobs and bosses like never before. Time rolls on. We slowly understand what we are missing and as we start realizing the how we got into this trap, it is the housing loan which begins to appear like a mountain on our path to freedom. Ok, we have realized our mistakes. What can be done now? We can transfer loan to another bank at a lower rate and get some relief. We can liquidate some savings to pay-off the debt partially. Well, if it still hurts then it is time to become an even harder working slave. Take a resolve and direct much of savings to paying off the debt. That way a 20 year loan can be repaid in 5 years or so. Well, we can earn freedom from EMI at least 5 years from now, that is a lot better than 20 years.

I have figured out how I can bring down my housing loan EMI to equivalent of rent. I am focused on executing that plan and keen to end the slavery in couple of years. I know buying a house is not at all a mistake but we should be willing to be a slave (let go of other good things in life) to digest that loan. Shorter the enslavement period, the better it is. When I am off the hamster wheel, I will let you know.